ON A ROLL

Dry grocery has never been a huge part of Wawa Food Market's business. But now it's getting even smaller.As it shifts more focus to fresh foods and aims to position itself as a destination stop, the convenience store chain is slashing its dry grocery assortment in half by rationalizing SKUs, cutting subcategories and, in a few cases, eliminating categories altogether.Wawa is working toward 3- to 6-foot

Dry grocery has never been a huge part of Wawa Food Market's business. But now it's getting even smaller.

As it shifts more focus to fresh foods and aims to position itself as a destination stop, the convenience store chain is slashing its dry grocery assortment in half by rationalizing SKUs, cutting subcategories and, in a few cases, eliminating categories altogether.

Wawa is working toward 3- to 6-foot grocery planograms, down from at least 12 feet just a few years ago, said Robert Price, senior vice president and chief marketing officer for the chain, based in suburban Philadelphia. This will make room in Wawa's 3,000- to 7,000-square-foot stores for growing categories like fresh coffee, food-service items and gift cards. Wawa, which takes its name for an Indian word for the Canada Goose that was found in Pennsylvania's Delaware Valley, operates 560 stores in Delaware, Maryland, New Jersey, Pennsylvania and Virginia.

"We see such a compelling opportunity in items that are frequently consumed and immediately required that being an intercept location for fill-in grocery shopping is less exciting to us," Price told SN.

Today's consumers can pick up convenience items in any manner of places, from office supply to home improvement stores. This channel blurring, along with the lack of profits from fuel sales, has prompted some c-stores to rethink and sometimes sharply curtail their grocery assortments.

For example, Nice N Easy Grocery Shoppes in upstate New York has stopped certain dry groceries like tinned meats and cake mixes in favor of fast-selling items (See "Soup to Nuts," SN, Feb. 13, 2006).

Some c-stores, like Wawa, have chosen to operate less like mini-marts and more like restaurants in hopes of generating more foot traffic and higher profits, said Jeff Lenard, spokesman for the National Association of Convenience Stores.

"A customer will buy a grocery item like ketchup maybe every few weeks, but may come in every day for a sandwich or cup of coffee," Lenard said.

In Wawa's case, most dry grocery categories, except high-frequency items like salty snacks, cookies and single-serve carbonated soft drinks, are affected by the reduction.

The chain will continue to carry the grocery items customers expect, like paper goods, only on a smaller scale. Instead of carrying single and four-pack rolls of toilet paper, it will carry only single rolls. Variety of paper cups also will go down.

As for brands, the ones that get to stay will vary depending on the category. In some cases, national brands will dominate; in others, regional, private-label or controlled brands will.

Along with non-edible grocery, shelf-stable food is also being reduced. Packaged bread and roll SKUs are dropping from 200 to 100. Cereal went from 15 to four SKUs, from General Mills and Kellogg. Wawa continues to carry 2-pound bags of granulated sugar, but has stopped selling the 5-pound bags. And it has eliminated brown sugar, white vinegar and evaporated milk.

Most of the category eliminations fall in seasonal dry grocery. For instance, Wawa will no longer carry cranberry sauce.

Price is confident the changes will position the chain as a destination stop rather than a place to go when traditional stores are closed or inconvenient.

"We want to be the stop of first resort, not last resort," he said.

To make sure it's using space as efficiently as possible, Wawa also has asked its vendors to conduct SKU rationalizations.

It wants vendors to offer more creative ways to go to market, such as using Wawa as a platform to try out new items, smaller package sizes or co-branded products. The reward is secondary displays and more cross-promotional activities.

"We're asking them to invest in our long-term strength, even if it means with a smaller assortment," Price said.

A handful of companies, mainly regional ones, actively embraces the effort. Salty snacks maker Herr Foods, Nottingham, Pa., is one of them.

Wawa's SKU rationalization gives Herr the chance to be a better business partner, said Ed Herr, company president.

"We would do it for anyone that would give us the business that Wawa does," Herr said.

Herr Foods added an employee to track sales per foot in Wawa's stores to make sure Herr has the fastest-moving items on the shelf, he said.

Along with rationalizing its SKUs, Herr gives Wawa product exclusivity for a limited time. When Herr launched new Philly Cheese Steak Chips, it distributed them in Wawa for three months before selling them to other retailers. Herr and Wawa are also discussing the possibility of a co-branded product, Ed Herr said.

About one-fourth of manufacturers have resisted Wawa's SKU rationalization efforts, according to Price.

That's not surprising, given that vendors are reluctant to take products out of distribution, said David Bishop, director of consulting firm Willard Bishop, Barrington, Ill., who specializes in small formats. "They want to have a certain portfolio in-store."

Nevertheless, streamlining its assortment will let the retailer focus less on manufacturer trade deals and more on selling.

"Wawa understands there's a greater upside to offering the right products and selling more of them," he said.

The Wawa Way

Along with de-emphasizing its grocery offering, Wawa is expanding its private-label line in an effort to further set itself apart from competitors.

Wawa, which is unusual among c-stores in its private label breadth, is developing 100 store-brand SKUs, which will bring its total to 400. New private-label items include packaged teas, ice cream, novelties, nuts, flavored bottled water, yogurt, pudding and gift cards.

The company got its start in private label about 100 years ago with the opening of the Wawa dairy. It has since built up the business to include a strong food-service assortment, including a highly successful fresh coffee program.

Along with growing its food-service offerings, Wawa is also focusing on its shelf-stable assortment by offering a unique mix of private-label, national, regional and controlled brands, said Robert Price, senior vice president and chief marketing officer, who estimates that Wawa's private-label penetration is 10 times that of the typical c-store chain.

The goal is to differentiate Wawa by making its brand the dominant one in several categories, said Price, who handled marketing and private label at H.E. Butt Grocery before joining Wawa in 2003.

Take bottled water. While there are a few stockkeeping units of Evian water, the remainder are Wawa. The same goes for yogurt, which, other than several Dannon SKUs, is dominated by the store brand.

In other categories, only the Wawa brand is offered. While it once carried both Maxwell House and its own brand of canned coffee, the chain now carries only Wawa.